As the stock markets plummeted in 2008 and 2009, many pre- and post-retirees withdrew all their funds from their annuities.
Many also took significant losses – something they’re still recovering from to this day.
As a result, many people may now want to know if they can deposit any proceeds in excess of the cost of purchasing the annuity into an Individual Retirement Account, known as an IRA.
Well, you see, it depends.
And it depends on a lot of things.
Some annuity contributions are made with pre-tax dollars, and others are made with after-tax dollars.
If the annuity consisted of qualified funds, such as an IRA, it can be rolled into an IRA.
On the other hand, if the annuity consisted of non-qualified funds, it cannot be rolled into an IRA.
If the annuity consisted of non-qualified funds, though, there is one small bright spot.
According to the rules, if a non-qualified annuity is surrendered for less than its cost basis, you can use the full amount of the loss to offset ordinary income.
You’d do that with any capital loss, but in this case the loss should not be subject to the $3,000-per-year capital loss limitation.
Of course, the preceding information is just an overview.
It’s best to contact a professional investor.
A professional investor will be able to help you determine if you can roll your annuity surrender proceeds into an IRA.
The legal and tax information contained in this article is merely a summary of our understanding and interpretation of some current provisions of tax law and is not exhaustive.
Consult your legal or tax counsel for advice and information concerning your particular circumstances. Neither we nor our representatives may give legal or tax advice.